NCLT and NCLAT shouldn't interfere in insolvency resolution proceedings: SC

The Supreme Court on Thursday said the National Company Law Tribunal (NCLT) and the Appellate Authority (NCLAT) should refrain from interfering in insolvency resolution proceedings by the Interim Resolution Professional (IRP) and the Committee of Creditors (CoC) of the lender banks of a sick enterprise under the Insolvency and Bankruptcy Code (IBC).

Making it clear that the role of adjudicating bodies -- NCLT and NCLAT -- come only after resolution plan is finalised, a bench of Justice Rohinton Fali Nariman and Justice Indu Malhotra said that by their "jumping in" when the proceedings before IRP and CoC is going on is like throwing spanner and everything goes.

Emphasising that "None of these steps by the Corporate Insolvency Resolution Process (CIRP) and the CoC could be interdicted in between", the Court said, "They (NCLT and NCLAT) are not supervisory authority to see what is happening, who was invited, who not..."

Making it clear that the adjudicating authorities do not come into picture when resolution process is before IRP and CoC, Justice Nariman said it is only after the resolution plan is finalised that the "adjudicating authorities can look into the whole thing including if it is in accordance with the law."

The court said this in the course of the hearing of a petition by ArcelorMittal on challenging the NCLAT order directing it to clear Rs7,000 crore liability now beleaguered Uttam Galva and KSS Petron with whom he was previously associated by virtue of his 29 per cent holding.

The court said that "everything is wrong" in the case of resolution proceedings on Essar steel.

"Here, everything is wrong, from top to bottom. Adjudication is wrong," said Justice Nariman.

The Court's observation that both NCLT and NCLAT should remain at bay till corporate resolution proceedings are being conducted by the resolution professional and the CoC came while it agreed with senior counsel Harish Salve that till the insolvency proceedings are being carried out by the resolution professional and CoC within the timeframe of 270 days, the adjudicating bodies should stay away.

The only question or concern in the corporate resolution proceedings, court said is "How do you propose to lift the company out of weeds."

The court said this as Salve advocated that CoC, which is the main force for the hammering of the resolution plan should have an elbow room to deal with the interested parties as the goal is "maximisation of value" of the entity facing proceedings under IBC.

"Anything that maximises the value (of entity facing insolvency proceedings) and stays within 270 days (180 plus 90 as provided under IBC), NCLT should stay away, Salve told the bench.

He said that IBC could not be read in a wooden fashion where a person with a good resolution plan is ousted mere because he is in default somewhere else. He said that CoC can always ask him to clear the default and entertain his plan.

Liquidation of assets is an option that is always there, Salve said pointing out that liquidation would not result in maximization of value but would result in their minimisation.

The court asked Salve and also senior counsel Gopal Subramaniam to give a note on alternate permutation and combination if a resolution plan suggested by the resolution plan accepted by the CoC is junked at the stage of NCLT, NCLAT and the Supreme Court and all these stages consume three years.

"If process starts again what we do," Justice Nariman asked.

Salve told the court that there should not be no "interception of resolution profession and CoC by the NCLT. NCLAT or by the High court under Article 226 till the plan is finalised as profession resolution is not a statutory proceedings."

The day long proceedings also saw Salve telling the court that even if he was willing to pay Rs 7,000 crore -- an eligibility condition saddled by the NCLATA for ArcelorMittal to be eligible to bid Essar Steel -- that would not be an easy task.

Payment of Rs 7,000 crores, Salve told the court would result in tax liabilities for Uttam Galva and KSS Petron and also asked in what capacity he would be making these payments.

Pointing to the "much fuss" over the putting Rs 7,000 crore in escrow account, Salve said, "I can't pay for Uttam Galva as it will become taxable. It is not as easy as that you pay (to become eligible). You have to go through regulatory mechanism. There has to be a corporate structure to pay."

NCLAT has saddled ArcelorMittal to clear Rs 7,000 crore liability of Uttam Galva and KSS Petron as it was associated with these two companies. .

ArcelorMittal is contesting this liability saying that he had divested its stakes at loss not for being eligible to bid for Essar Steel but described it as bad investment.

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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COMMENTS

pvmaiya

2 months ago



NCLT and NCLAT arrogantly assumed powers not vested in them and frustrated resolution biy the Resolution agent and the creditors. There are strong rumours that much money has to be passed under the table for these entities for some settlement and the only sufferers are the creditors- banks who take a huge hit called

euphemistically ‘hair cut’.

Debt tribunals de-cluttered to focus on high value NPAs
The Finance Ministry on Tuesday doubled the minimum threshold for filing cases in debt recovery tribunals (DRT) to Rs20 lakh to de-clutter DRTs so that they can focus on quick recovery of high value non-performing assets (NPAs).
 
It also advised public sector banks (PSBs) to develop an e-auction portal in collaboration with the Indian Banks' Association (IBA) and upload details of properties of all defaulters on the common platform to have an enlarged bidder base.
 
"The Department of Financial Services has adopted a targeted approach to make debt recovery laws and processes more effective so as to increase recovery of public money from defaulting borrowers," Finance Services Secretary Rajeev Kumar told reporters. 
 
He said the government is expecting good recovery in the second quarter.
 
As per the government data, there were 38,376 cases with a default amount between Rs 10 lakh and Rs 20 lakh pending in DRTs till June 30. This accounted for 38 per cent of the total pending cases but amounted to only four per cent of the total value, he said.
 
The share of cases in the range of Rs10 lakh to Rs20 lakh filed with the DRTs in recent months increased to 41%.
 
"Data indicates that 80%-85% of NPA cases in the range of Rs10 lakh to Rs20 lakh are fully secured. For their recovery, lenders can take action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act," Kumar said.
 
The secretary added that while auctioning of properties is a core activity of banks to ensure recoveries, in the absence of modern techniques, positive results from property auctions were limited and potential buyers were not fully informed of all details.
 
"Now PSBs have been advised to get together with the IBA steering an initiative to redesign the PSB e-auction websites. Details of auctionable properties across banks have been standardized and a common platform is on the anvil," he said.
 
The government has asked state governments to monitor and ensure that orders are passed by the respective district administrations within the stipulated 60 days time limit and extend help to banks and financial institutions to get possession of secured property of defaulting borrowers.
 
"Over 10,000 applications from PSBs are pending (at the districts)... District Magistrates are required to pass orders on secured asset seizure within 60 days by banks for their further disposal," he said.
 
Kumar said the government has started computerizing the records of cases across all 39 DRTs and five Debt Recovery Appellate Tribunals. Similar to the e-court software, the e-DRT will enable banks and asset reconstruction companies (ARC) to e-file cases and access all relevant records.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Rupee inches closer to 73, hits 72.91/$
Continuing its downward trend, the Indian rupee hit a new low of Rs 72.91 on Wednesday morning.
 
The rupee has been on a down slide owing to inflationary pressure and decline among its global peers against the dollar.
 
On Wednesday, it opened at a low of 72.78 per dollar, against the previous close 72.69 per dollar.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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